Why ILO’s Guy Ryder Prescribed ‘Policy Mix’ for World of Work

Today is International Workers’ Day and it is marked globally in honour of men and women who turn the wheels of productivity in return for salaries and wages.

Economic standing of countries and other sundry factors have rendered wages and workers welfare uneven globally, this has led to conflicts in the world of work between governments as employers of labour/policy makers; private employers of labour as major stakeholders in job creation and workers themselves represented by unions.

In his speech recently at the meeting of the International Monetary and Financial Committee in Washington D.C on April 22, 2017, Mr Guy Ryder, Director-General International Labour Organization prescribed that countries will need different policy mixes but a common agenda for national policy dialogues among governments, workers and employers to resolve a diverse range of challenges confronting the world of work.

He highlighted some of the salient challenges being faced in the labour sector to include but not limited to the following:

Economic Growth and Employment Vulnerability

According to Ryder, despite a mild pick-up compared to 2016, global economic growth is expected to remain below long term trends in 2017 and 2018. “Against this background the ILO is projecting that global unemployment will increase by 3.4 million in 2017 to reach a level in excess of 201 million,” he said.

He noted that demand-side as well as supply-side policies are needed to rekindle the positive relationship between productivity and real wage growth through increased investment, innovation, sustainable enterprise creation and decent work.

“Most workers in developing countries are not covered by social protection systems” said Ryder, “when labour markets slacken these workers need to join or remain in the informal economy to try to earn some income.

“Vulnerable employment, which measures the share of own-account workers plus contributing family workers in total employment, is a widely available measure of the scale of such informal work. Between 2000 and 2010 significant progress was made in reducing the proportion of workers in vulnerable employment, contributing to the parallel reduction in the incidence of extreme poverty. This was a period of robust growth and rising incomes in most developing countries.”

However, he noted that more recently this progress has slowed significantly or stalled altogether and that the rate of vulnerable employment is expected to decline by less than 0.2 percentage points a year in 2017 and 2018, leaving some 1.4 billion people world-wide in chronically poor quality jobs.

“Globally 760 million women and men are working but not able to lift themselves and their families above the $3.10 a day poverty threshold. South Asia and Africa, where the age profile is still young, account for three quarters of working poverty. In absolute numbers working poverty is increasing in these two regions although as a share of the working population it is slowly falling to just under half in South Asia and around 60 per cent in Africa.

“The absence of enough decent work opportunities is dangerously destabilizing for economic, social, environmental and political development and jeopardizes realization of the 2030 Sustainable Development Goals,” he said.

Ryder added that the increase in global unemployment is concentrated in emerging economies and reflects the continuing effects of deep recessions in 2015 and 2016 in several countries.

Youth Employment

“Lack of decent employment prospects for youth rings a global alarm,” he said, “Youth unemployment is a major concern in all regions because of the immediate and longer term social and political costs. Both the absolute level and the rate of global youth unemployment increased marginally in 2016.”

Ryder disclosed that the ILO projects a further increase in youth unemployment to more than 70 million in 2017, or one in eight of the global youth workforce.

He stated that much of the increase is concentrated in Latin America, the Caribbean and sub-Saharan Africa.

“Furthermore, ILO School to Work Transition Surveys show that in low income developing countries three quarters of young people are only finding work in the informal economy,” he added.

Wage Inequality

Ryder noted that average wages do not tell the story of how wages are distributed among different groups of wage earners and that wage growth remains subdued for all but the very highly paid.

He said during recent decades wage inequality has increased in many countries around the world and is frequently correlated with greater household income inequality and declining labour shares.

“In many countries, average wages are pulled up by significant increases at the very top of the wage distribution often in the form of bonuses and benefits.

“The ILO has tracked the trend in average wages and productivity in a sample of 36 advanced economies since the late 1990s. Over this period labour productivity growth exceeded average real wage growth by roughly 10 percentage points. This gap between real wage growth and productivity growth has resulted in declining labour income shares. Similar long term trends are evident in the majority of emerging and developing countries where data is available. Recent ILO research suggests a correlation between declining labour income shares, rising income inequality and slow growth,” he said.

Gender inequality at work

According to the ILO boss, inequality between women and men persists in global labour markets, in respect of opportunities, treatment and outcomes. “Over the last two decades, women’s significant progress in educational achievements has not translated into a comparable improvement in their position at work. In many regions in the world women are more likely to become and remain unemployed, have fewer chances to participate in the labour force and – when they do – often have to accept lower quality jobs. Progress in surmounting these obstacles has been slow and is limited to a few regions across the world.”

He adds that the unequal distribution of unpaid care and household work between women and men and weaknesses in social care are important determinants of gender inequalities at work. Gender inequality at work reduces the productive potential of economies and is a macro-critical issue.

“Economic growth and stability are necessary to broaden women’s employment opportunities, but at the same time, their participation in the labour market is an important driver of growth and stability. In rapidly aging economies in particular, higher female labour force participation can mitigate the negative impact of a shrinking workforce on potential growth.”

“In 2015, the global gender gap in the employment rate amounted to 25.5 percentage points in women’s disfavour, only 0.6 percentage points less than in 1995. Furthermore, women are over- represented in low paid sectors and the informal economy. Among wage and salaried workers, substantial gender wage gaps are narrowing slowly. Among 37 countries and territories with data for two periods between 1999 and 2013, the gender wage gap has declined from 21.7 to 19.8 per cent. Without targeted action, at the current rate of decline, pay equity between women and men will not be achieved before 2086,”he said.

Globalisation

“People’s perceptions of the fairness of globalization are closely connected to the realities of job prospects. The weakness of global labour markets and their failure to recover fully from the financial crisis has led to a widespread frustration with the seeming inability of “globalization” to offer a realistic chance of decent work for all,” said Ryder.

He noted that a recent research on the impact of imports from China and Mexico on jobs in the USA shows that in localities where a major industrial employer has become exposed to increased imports, employment and wages fell both in the affected industry and the local economy.

“When the economy is growing most job leavers find a new job quickly but in periods of slow growth it takes longer. Strong investments in employment and social policies that help workers through periods of unemployment and facilitate their adjustment are necessary to counteract the significant losses that some workers may otherwise sustain in a globalized economy.

Ryder prescribed the following strategies:

Infrastructure investment, in water and sanitation, transport, energy, ICT connectivity and housing

Quality education and training

Improved job search and matching services

Support for the development of sustainable Small and Medium-sized Enterprises

Integrated policies to facilitate transition by informal workers and enterprises to formality

Ryder also noted that regardless of whether widening income inequality results from globalisation or technological change, the most economically efficient and rapid way to counteract the recent widespread rejection of open economies and societies is by strengthening labour market institutions. This includes stronger efforts to promote freedom of association, collective bargaining, minimum wages and social protection floors. Upgrading education and skills also has an important role to play, but these policies will only have an impact on income distribution in the long term.

He urged that opportunity to shape faster and more inclusive growth and development must not be missed, stressing that a much stronger focus, nationally and internationally, on employment and social policies that address directly widespread concern about prospects for decent jobs and living standards is essential.

“Managing Director Lagarde has described a cyclical recovery that holds the increased promise of more jobs, higher incomes, and greater prosperity but she has also warned of the risks of a weak productivity trend that continues to be a severe drag on strong and inclusive growth.

“Grasping the opportunity to shape a global path to faster and more inclusive growth and development must not be missed. The ILO’s Future of Work Centenary Initiative is giving in-depth examination to the several drivers of change in the world of work and how to meet the global challenge of ensuring decent work for all women and men,” Ryder said.